Reid Hoffman | Philosopher vs MBA

Hi everyone. Welcome to Gray Matter, the podcast from Greylock, where we share stories from company builders and business leaders. I'm Heather Mack, head of editorial at Greylock. Today we're rebroadcasting our episode with Greylock general partner Reid Hoffman and his Blitzscaling co author Chris Yeh, discussing the ways a degree in philosophy compares to a much more conventional business background, the Master's in Business Administration or mba. This episode is the second in a two part series discussing the impact of philosophical study on entrepreneurship. If you missed the first, you can find it on the Gray Matter channel on Spotify, SoundCloud, YouTube, or wherever you get your podcasts. You can also find the accompanying essay to this podcast along with all other Gray Matter content on our website greylock.com.

Blog hello, it's Chris Yeh, the co author of Blitzscaling. And once again I'm here with my co author and old friend Reid Hoffman, the co founder of LinkedIn and investor at Greylock Partners. Last time we had a fun discussion about why a knowledge of philosophy is actually a great asset for entrepreneurs. We talked about some of Reid's favorite philosophers and how he's applied their ideas. And certainly you're welcome if you haven't listened to that yet, to go back and listen to that episode. But this time what we're going to do is to take a look at how a philosophy degree compares to a much more conventional business background, the Master's in Business Administration or mba. And it just so happens that I have one of those MBA things from Harvard Business School, which lets us incorporate both points of view into today's dialogue. So since we talked about philosophy last time, let's start by covering MBAs. Now Reid, you're not a particular pro MBA kind of guy. In fact, I think you said, and I quote, there are two things that need to be explained away in order for me to invest in your startup. An MBA or a background in management consulting. And you're actually one of the more polite Silicon Valley figures on this topic. Your friend Peter Thiel once said, never ever hire an mba. They will ruin your company. So let's explore this. What do you think are some of those negatives associated with MBAs and management consultants? And why would you avoid them when it comes to entrepreneurs?

It isn't actually fully avoid. As you know, I was precise in my language, which was explain away. Because there are of course amazing MBA entrepreneurs and investors, one of whom is a friend of both of ours. Anil Bushri of Workday is a classic example of someone you would stampede towards investing in versus stampede away from. And it's part of the reason why I also tend to not do the universal broad brush kind of categorical statements that Peter makes. And so I'm a little bit more nuanced now. The reason I still make that statement is because the orientation towards people who select going into MBAs generally and management consulting generally is towards things that are adversely selective in entrepreneurship. So at a very broad brush, entrepreneurs have a tendency to just go do it, you know, get in motion. You say, well, I don't have X, that's fine, I'll pick up X along the way, I'll hire someone, I'll partner with someone, I'll find the resource, et cetera, et cetera. And so most entrepreneurs are like, no, no, it just needs to be built. Whereas frequently in kind of the MBA and the management consulting, it's a way stop towards a better job, towards the preparation for the future, towards a guaranteed minimum outcome, like I'll be paid at least this. Those kinds of things are most often why people go into them and they are also not doing, not building. It's really trying to reduce risk a whole lot, not taking a risk. And as you know, Chris, the most often time that I say that quote that you have accurately quoted me on is almost always when talking to a group of MBA students. Because what I'm trying to do is I'm trying to get them to reflect on their own, kind of like why they're in the MBA program, how they're approaching risk taking, how they're approaching a default biased action and what it is you're doing. Because it's not, by the way, entirely the case where you could say, well, like you said, well, I'd like to found a startup, but am I really ready yet? You know, then my advice tends to be go join a startup, go get in a startup and be doing it as we're doing it. So it doesn't have to be. Everyone's going to go found one or go find one right away. There is useful preparatory stuff. I myself, when I was thinking about like, well, I'd like to create a new set of kinds of software products that no one seems to be creating. I did explore whether or not I could go start something myself. I went well actually, in fact, I needed to pick up certain product management skills, certain knowledge of, of kind of online services and Internet services as a way of doing it. I needed to work with development teams. I needed to understand how a commercial software team produced software, produced it through Quality checking and through support. I had no idea even when I started my company that I needed to be focused on go to market and distribution. Which one of the reasons why first time founders so frequently find it painful because there's critical things that they really wish they had known more of before they ran over the landmine. But even with all of that, the question was I wasn't trying to make myself have a higher credential, I wasn't trying to raise my baseline salary, I wasn't trying to have a claim towards expertise, but actually in fact get towards building the thing. Now, by the way, one of the things that I also find positively predictive is when an MBA essentially take Jeremy Stoppelman of Yelp, goes to Harvard and then drops out because he's like, no, no, no, this isn't going to help me go start this thing, I'm going to go start the company. And that's the kind of bias to action and bias to building that you're looking for.

And I do think that you have a very accurate assessment of the risk tolerance of most MBAs. So both MBAs and consultants in many cases are performing what I call an act of career laundering. And many of my classmates at Harvard Business School had come out of the military or out of the nonprofit world. And under those circumstances, the power of the MBA's brand is overwhelming. You go in as someone with no business experience and who knows literally nothing about the business world, and you come out as a Harvard MBA, the equivalent of the other Harvard MBAs. And you, you're now competed after by the management consultants and investment banks in the world. So for those people, it's a very sensible approach if they're not looking to go into startups. Because as you point out, there's nothing that you learn in an MBA program that necessarily helps you in the startup world, unless you go out of your way to take some startup specific courses.

But even that, and I would love to hear your experience, one of the things that I've wrestled with for decades in consideration with, you know, the Harvard Business School, the Stanford Business School, the Oxford Business School, is what are the ways in which entrepreneurship can be taught versus learned? And I do think that there is ways that you can try to increase its learning within an educational institution. Although the most often mistake I see is the business plan competition, which I tend to think is oriented entirely at a different set of incentives than the actual, in fact, really great business plans. If you look at it, none of the even moderately massively successful, let alone the massively Massively successful businesses. None of them started as a business plan competition. A couple of successful businesses have and have been successful, but none of the industry changing, none of the world changing ones, other than maybe FedEx, maybe FedEx was. And that wasn't a business plan competition, that was a final. Right, that was a.

And remember he got a C plus on that. His professor hated the idea. Which just tells you everything you need to know.

Yes, exactly. And so part of the thing I think is even you say, well, I'm gonna learn entrepreneurship at these things. And I think the answer is you can learn a set of skills that can be helpful into your entrepreneurial journey. You know, some analysis of markets, some questions about, well, the fact that these things are very ad hoc and duct taped together as they're going. The fact that you need to think about what the scope of different skill sets are and go to markets and you can kind of study some company's business mod and see if any of them are now tools that are applying to how you're thinking about it. But the short answer of which is you should presume that coming out there is none of that stuff is the actual learning of entrepreneurship. That's kind of like learning, reading and writing, which is useful in entrepreneurship because you do need to read things and understand them and write things to, you know, memos and plans and PRDs and marketing documents and all this. So you're doing that, but you're not yet learning in the entrepreneurship side anyway, so. But you may have something different giving. You're the person on this podcast with an actual mba.

Well, in a very self serving way, I feel like the approach that I ended up going with is probably the right approach when it comes to getting an mba because I actually worked in the startup world for three years before I started at hbs and I had helped start two companies during that time. So as a result, when I was going to business school, I wasn't going to business school because I said, oh, I need to learn about how to start a company. I wasn't going to business school because I said, oh, I need to somehow launder what I've been doing and come out the other side and get a job in management consultancy. I went to business school because I thought that I had been operating an environment. I'd gone and worked at D.E. shaw and Company, which is famously the company that Jeff Bezos worked for before he started Amazon. And it was a company run by computer scientists with many of the smartest people in the world. But what I learned there was a lot about startups. But I also said, you know what? I don't understand how normal business works. I don't understand what the conventional wisdom is. And if I'm going to defy the conventional wisdom, I want to understand it first. And so I ended up going to Harvard Business School, unusually, not to learn about entrepreneurship, but to learn about regular business. So if I were selling to those businesses in the future or dealing with them, I'd have a better background. And I will say there were a few classes I took that were somewhat useful. Particularly I'm thinking of the entrepreneurial finance course, where I think a lot of entrepreneurs go in, they don't fully understand how venture capital works. And taking entrepreneurial finance and going over the basics of what actually happens when you're financing a company and what's in the mind of the investor is probably useful. Now, of course, any academic course is really very different from what actually happens in the real world. It's not like after that I was prepared to go out there and negotiate term sheets or something. But I do think that if you look at an MBA as a way of getting a grounding in the conventional thinking and a background broadly in how various different parts of the ecosystem work, then you know, there is value to doing it.

By the way, that's part of what I was meaning by explained away, which is, in fact, if someone says, look, I've already done a couple startups, here's the lessons I've learned from that kind of entrepreneur stuff. This is the one I'm adding into as a function of doing it. And this struck me as an efficient way of adding in, not I am learning entrepreneurs. So, like, for example, the classic mistaken pitch is, well, I came out with an MBA because I'm super smart, and I've now learned all these things. I'm now, because of the mba, much more ready to do a entrepreneurial job or be a founder. And then the answer is no, you have a misunderstanding that's likely to be a landmine that you're going to run over. And so therefore that would be a red flag.

Yeah, I think the other thing that the MBA can help you do is to fill in some of those blanks that, that most of us would otherwise never learn. So, for example, you take classes on accounting and finance. I mean, before I went to business school, I didn't know how you debited or credited and what the difference between an income statement and a balance sheet was. And those don't come up every single day. But if you're founding a company, you don't just want to leave it up to some controller or cfo. You want to actually understand what's going on or somebody's going to rob you blind.

Or it could. I mean, although, also, this is part of, again, the entrepreneurial thing is you find someone, you know, an advisor, an employee, a co founder, et cetera, who navigates all that stuff. And you're going to need to do that across many more skills than you have anyway. And so it's that assembly of the team that is the really key thing versus the individual bodybuilding of, look, you know, I have an MBA from Stanford, Harvard, Oxford, whichever. Okay, whatever.

Right now, one of the areas where you didn't criticize the mba, but it is one of the areas that people often cite with MBAs. And I want to dispel some of the myths about it. There's this notion that going to business school is phenomenal for your network. And of course, Reid, you are very familiar with networks. You have been building networks your entire life. You even coined the term the network age. And there's no question that going to a business school builds up your network. You're going to school, depending on the school, with somewhere between 200 to 800 of some of the people who are going to be future business leaders in this world. And developing these relationships can be enormously valuable. But I would argue it's not as valuable for startups as you would think, because the majority of the people that you're going to be interacting with are going to be going into investment banking and going into management consulting. And in fact, if you're looking to network in the startup world, and for people like you and I who are no longer going to be building the product directly, one of the most important things is getting to know brilliant engineers and technologists. Going to business school is almost exactly the wrong thing. You're better off going to work for a phenomenal company which does a great job of bringing those people in and then demonstrating to them that you're one of the people who really gets it, so. So that they want to work with you. At least that's how I see it.

Oh, I actually think you're 1000% correct, because the notion of, well, it should have a network is, well, a network for what Networks are shaped to be both safety nets and trampolines for particular kinds of things. So, for example, if you are in a kind of version of like, oh, I'm going to a MBA school, it's a lot of finance people, a lot of bankers, occasionally people who are trying to raise within traditional industries. And even though there is kind of more people who are interested in entrepreneurship, none of those people are plugged into entrepreneurial networks. That's the reason they're all going to mistakenly to a business school for their entrepreneurship network. Whereas you say, well, where is an entrepreneurship network? Well, that's out of amazing companies. It's about of the growth of an Airbnb or the, you know, the growth of a Palo Alto networks or a workday. You know, like, those are the things that, okay, I've met engineers and I meet product managers, I meet designers and I meet go to market specialists and I meet. And they're all interested in it. They have the bias to action. They're doing it. Those are where you build those networks. It would be like saying, hey, I'm going to go build an academic network so that I can be a good entrepreneur. It's like, well, that's not going to work. You say, well, but even if I connected with this lab and the lab has good technology, he's like, yeah, but the lab has no sense of any of this entrepreneurship thing unless it happens to be one of those labs that really births very specific entrepreneurial companies, which we hope to have more of. But it's very rare across the US and indeed in the world. And so what shape of network you're building, like, who are the other people who are sharing the mission, the skill set and the diversity of things that you need for entrepreneurship? Now for the very last point of it, it's one of the reasons why for building software businesses, people have been, and I think will continue to move to Silicon Valley for this because it's the Silicon Valley network. So you've seen a little bit post pandemic people kind of going, well, I think California's mishandled the pandemic. And so I'm moving to city X, state Y, et cetera. And look, I think the more places there's great entrepreneurship networks, the better. But you need that entrepreneurship network. So that's why I continue to be very, very bullish on Silicon Valley and perhaps not so bullish on Miami.

Now, I think one of the interesting things is that there is a pocket of Silicon valley where the MBAs do in fact, wildly dominate. And that is in your industry, the industry of venture capital, something like 40% of venture capital general partners have a degree from Stanford or Harvard, generally either Harvard Business School or the Stanford gsb. And I think this is my theory. I'm curious what your theory is. I think the reason that's true is because venture capitalists are on some level generalists and they're working with portfolio companies. They need to connect across multiple industries and especially if they're on the enterprise side, many different kinds of businesses. And that's the one sort of situation in which that very broad, very eclectic network within business that you get from going to a business school helps you out. Because if you need to due diligence someone who's selling to the fashion industry, you can contact three or four of your classmates. Or if you need due diligence, someone who is dealing. Like for example, one of my classmates is the CEO of Moderna. If I need to learn about messenger RNA technology, I would reach out to him. And that doesn't happen. It doesn't come up that often in everyday life. But if you're a venture capitalist, you never know what's going to come up.

I don't fully know. I don't know if the MBA network is particularly useful on the VC side because at least as I practice vc, again, it's the people who are in the flow of creating these companies, the engineers, the product managers, the serial entrepreneurs, none of whom have really any interface point on the MBA side. Now I hear your due diligence points and I hear your transformation and understanding of industries point. And you know, it could very well be that, you know, our MBA colleagues really do use their MBA network for that. Or even, by the way, a management consulting network would also have a similar kind of thing. Look, it's. This is an interesting discussion for this, but what I've previously thought is the reason why investors had a higher predominance of MBAs than entrepreneurs is because it is true that one of the things. So as an entrepreneur you have to have this sense of like, I got a strategic plan, I have this thing that could be big and possibly reinvent an industry. And I have some of the key components around technology or the business model reinvention or the go to market reinvention and some combination of those things. And hopefully I'm in a place where I can gather the necessary resources, hiring people, capital, other kinds of things in order to, you know, building things in order to execute on this plan which is the network you're looking for. Investors always have to be much better at saying, look, do I think this is the kind of business that's valuable? And you know, it's one of the things that venture returns tend to be much more correlated with things that have high P multiples or other kinds of Valuation of being strategic. There's a lot of different reasons. It's Plans B or maybe you sell to a strategic company. It's questions around growth rates and operating margins that understand these things. You don't have to be an expert on those. I think a lot of VCs are not particularly good public market traders on this stuff. But you have to have a sense of, oh, this could lead to a very valuable business. This might be a great product or service or something that's important in the world, but not such a valuable business is actually, in fact, one of the things that has to be central to the investing mindset. That is much rarer in the entrepreneur mindset and less essential for the entrepreneur mindset. Although obviously the successful entrepreneurs end up with that and also of course end up with being contrarian and right, like Elon and SpaceX. People going, oh, there aren't good multiples in the space business. Well, not unless you're pulling it off and revolutionizing an industry. And then actually, in fact, there is good multiples in that.

I think it really does come down to the fact that MBAs are all about conventional wisdom. And conventional wisdom can be very effective in helping you understand how business is done. Tends not to be as effective in figuring out how to revolutionize business or revolutionize an industry. And that's where I think it falls down. And again, that's why we do see some great MBA entrepreneurs. I think more so than before in the past. I think that fortunately the education of entrepreneurship has grown to the point where people can overcome their MBAs and be great entrepreneurs. But it still is the case that when it comes to somebody who's going to just upend an entire industry and it's more likely to be someone like an Elon Musk or a Brian Chesky or even a Diane Green, someone who comes from almost completely outside the industry.

Yes. And again, the MBA equals not entrepreneur is a foolish equation. Just like any equation. Like you would say a PhD in philosophy equals not entrepreneur or anything else. It's like, no, no, no. It comes down to the individuals, the dispositions and so forth. Now if you said as an overall class, you know, would I rather invest in CS graduates from a high skilled tech university, you know, Stanford, mit, Georgia Tech, or would I rather invest in MBA class Y? It's like, no, no, no. The technology creation as a higher, you know, kind of. If you said the whole portfolio is the better portfolio to invest in.

Now one of the things we talked about is MBAs and philosophers. And so I think that it's only fair to direct some attention towards the philosophy side of things. I remember I was reading a Reddit discussion thread where people were debating the practical application of philosophy, and of course, your name actually came up in which people like, well, you know, Reid Hoffman has a degree in philosophy and he's been enormously successful. Successful. And some of the people say, well, you know, Reid's success is atypical and really doesn't prove anything. It's a wild exception. What do you think about that? What's your reaction? Do you think you're somehow unique? Or do you think that there's other folks out there, people with a philosophy background or at least a grounding in philosophy, who've been very successful following a similar kind of path?

I think there have been a number of folks with philosophical backgrounds who've been successful. There are a couple comments that I would make on that, which I will get to in a moment, mostly through symbolic systems, this kind of major at Stanford. But first, the comments on where philosophy is useful and where it's not useful. And as you know, and as we talked about in the last podcast, I recently wrote a forward to David Jilkes and Brad Feld's new book, Nietzsche Daily Practice for Entrepreneurs. And part of what I was saying there was that there's a legitimate reason why people tend to say, well, there's a lot of philosophers who are not very good at entrepreneurship because they tend to want to be only dealing with very remote abstractions. They don't want to tend to be engaging with the iteration of studying what's actually happening in the world. They don't tend to have a experimental action bias to what's happening. And those philosophers, the people who are drawn to philosophy for those skills and dispositions, actually in fact won't make very good entrepreneurs. However, the ones that take what is good in philosophy, namely an ability to state theses with some precision, like, you know, here is like an investment thesis is to some degree an argument. And here are the premises and the conclusions and the reasoning of the argument about why this product and service will be something useful in the future. The fact that philosophy tends to be speculating about how human beings might evolve or interact with something that's not yet here the counterfactuals. This part of philosophers thinking about thought experiments, which I wrote my thesis on in Oxford, with thought experiments, is, hey, if we have this kind of product and service, how will people respond to it? How will competitors respond to it? What would be the iterative path of getting there and that thinking about this kind of predictive anthropology is, is actually in fact good on a philosophical skill set. Now, that being said, really what I'm saying in the vigorous defense of philosophy generally and as it applies to me isn't so much just, oh, I'm a philosopher, therefore I'm good at entrepreneurship, because, by the way, there's a lot of people who are great philosophers and would be terrible entrepreneurs, but it's philosophers with a multidisciplinary focus, the philosophers who actually tend to think it's philosophy. And, and so that's part of my undergraduate major at Stanford, Symbolic Systems, which as well, it's philosophy, computer science, logic psychology, linguistics, together with some invention of your own specific concentration. Mine was computation and cognition. And that actually tends to be a higher predictor of entrepreneurship success than, I think, usually more solo, focused disciplinary majors, even things like computer science and so forth, which obviously are part of the major technological revolutions that lead to interesting changes. And then the other thing I would say about the way that I've been showing what's great about philosophy is similarly when someone takes something else that's distinct from the classic computer science, electrical engineering, etc. And adds that in, in a multidisciplinary sense. So you could say design, which is like Steve Jobs or Brian Chesky. Sometimes it's things like economics, kind of looking at marketplace dynamics and so forth, but bringing that engaged cycle in the world and the multidisciplinary approach to it is, I think, what's central. And philosophy can be a really key element of that.

And it really strikes me, especially when you talk about the multidisciplinary aspect of it, it's the fact that entrepreneurs are not people who look at the state of the world as it is and a set of principles that everyone follows. And so I'm just going to follow them. They have to find their own way. And one of the best ways to find innovation is in taking something from one place and applying it in another, whether it's geographically or industry wise or what have you. And those multidisciplinary philosophers are really bringing something extra to the table.

TABLE Exactly. One of the historical biases that Oxford has as an educational institution is that no one is mature enough as an undergraduate for a pure philosophy degree. So their philosophy degrees are always mixed. You know, philosophy, politics and economics, pick two or three, philosophy and physics, etc. Etc. And to some degree it's the philosophy. And that I think is the high predictor for potential. As long as you're pragmatic in the right direction of philosophy and towards utility and entrepreneurship.

Now I'm very curious. Have you ever published your thesis?

No, I've looked at it and I actually want to at some point revise it and do it in part because I was only just an academic, even though I had been done small systems and so forth. And I was right about some of the things that I was thinking about, thought experiments and reasoning and argumentation. But there's now a bunch of additional thoughts that I've had and so I've been meaning to get back to it.

But you know, someday, someday in your copious free time. Although I'm sure I would say that when you do do that, provide both the original and the revised. Because I think that seeing the changes, the wisdom that you've accumulated over the years would be interesting for folks.

Well, I guess being embarrassed by your first product release parallel might work in similar domain.

Some really smart guy wrote that. I don't know, it came from somewhere, I guess. One final thing, just to finish off with our friends from the MBA world, I didn't want to leave them with the impression that we were Somehow down on MBAs as we described it. You know, there's still many reasons why they're helpful. And in fact, in your own career you've had a number of key collaborators, people you've worked with closely. Folks like Cheryl, Sarah Sandberg, who of course is an HBS alum. Jeff Weiner, who is a Wharton graduate who came in with a traditional business education and have also been enormously successful. What are some of the things that you've Learned from the MBAs that you've encountered in your career?

So I'd say that the MBAs that I really learned from because you know, obviously there's a lot of people who go into MBAs because they are focused on business and want to be successful and are driven and smart and because it takes a ambitious and high revving, high learning person to get into these MBA programs. But it's when they blend other things, it's a little bit like the multidisciplinary. So you've got Neil blended it with entrepreneurship, Jeff blended it with leadership and kind of a focus on compassionate management and leadership as a way of doing it. And Cheryl, prior to going into business, I think she going into business as, oh, I guess I should do that too as a leverage, had been working at the World bank and in government and so was bringing a kind of a how do you solve these problems at scale. Part of the reason why she was responsible for hiring a whole bunch of people in the new AdWords program for both management and sales and everything else at Google was like, okay, I've dealt with scale organizations. I have fresh and original thinking in order to bring it. And I'm bringing the kind of the, the thinking that got me into also working in a business program. And so it's vectors of multidisciplinary, although not necessarily another academic discipline as much as a zone where it isn't just oh, because I have an MBA only, full stop, it's the MBA blended with other things that are from the school of work and the school of building amazing scale organizations, products, services that I think create those learnings.

Well, I'm glad we got a chance to explore these issues at greater depth. I know they've come up in passing before. It's always nice to get a chance to dive into them and who knows, maybe out there listening. There are some philosopher MBAs, some people with a background in philosophy, and an MBA who will chime in on Twitter and let us know about how those two things have combined in their careers as well.

You know, I think you could even take a degree in performing arts and still have an interesting entrepreneurship thing. You really have to think about where you are in position in the network because one of the things about entrepreneurs is what is your real differential edge in going into a competitive environment in the reinvention or the creative disruption? It's almost always some sort of competitive environment. If nothing else, competitive for employees and competitive for capital and all the rest. And so you have to have that differential edge in your own abilities and in your network as deeply and as intensively as possible.

Wonderful. Well, Reid, that concludes this episode of Gray Matter. You can subscribe to gray matter on soundcloud.com greylock partners. You can also find new episodes and blog posts on greylock.com you can follow greylock on Twitter reylockvc perhaps where if you are one of those philosopher MBAs, you can let us know that you've been listening. And ultimately I think that we will just continue this discussion because that's what a philosopher would do. I'm Chris Yeh. On behalf of Reid Hoffman, thank you for listening.